Palm oil slips 2 percent on euro zone concerns

JAKARTA: Malaysian palm oil futures fell by as much as 2 percent on Wednesday, weighed down by losses in other edible oils and investor worries about the ability of European leaders to tackle a debt crisis threatening the global financial system.

Benchmark December palm oil futures on the Bursa Malaysia Derivatives Exchange traded 1.5 percent lower to 2,904 ringgit ($923) a tonne. Earlier, prices had fallen to as low as 2,887.

"The euro zone problems are still uncertain -- there doesn't seem to be a consensus," said a Kuala Lumpur-based trader. "Unless Dalian goes down further, we will stay roughly in a trading range of 2,900-3,000."

Asian stocks edged higher and a rally in the euro stalled on Wednesday as plans to increase the financial firepower of the euro zone's 440 billion euro rescue fund faced opposition in Germany.

On Monday, benchmark palm prices fell to 2,857 ringgit, its lowest level in almost one year, and have eased 3 percent so far this week as concerns about the global economy dominate sentiment.

Traded volumes for the November contract stood at 7,759 lots of 25 tonnes each compared with 14,191 lots on Tuesday.

Reuters analyst Wang Tao, saw palm oil futures resuming their downtrend towards 2,820 ringgit per tonne, as indicated by the lower channel line of a falling channel.

In other vegetable oil markets, US soyoil for October delivery eased, while China's most active May 2012 soybean oil contract also traded lower.

"The market is again lousy," said a Jakarta-based palm oil trader. "So far, stocks markets are good - I just hope this can bring more buyers in."

Brent crude fell below $107 on Wednesday, after sharp gains a day earlier, weighed down by a stronger dollar as investors sought refuge in the greenback amid lingering concerns over the euro zone debt crisis.

In fundamentals, which are being largely ignored by commodity investors, China will again sharply raise imports of soyoil, palm oil and soybeans in 2011/12 as insufficient domestic oilseed production continues to be outpaced by rapid demand growth, Oil World said late on Tuesday.

A Reuters survey also showed that India, the world's top buyer of edible oils, could boost imports 5.2 percent in 2011/12, reversing a fall this year.

The palm market, which has lost 23 percent so far this year, is counting on demand from both nations to support prices. India will celebrate the Diwali festival in late October while China will be closed for a national holiday next week.

Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance may offer clues later this week about demand when they issue their September palm oil export reports from Malaysia on Friday.

Copyright Reuters, 2011